Remote Salaries: Understanding the Compensation Divide
"How do Remote Salaries work?
Some companies pay high wages, but others cut salary for employees in low-cost countries."
After having hired and managed hundreds of engineers in my remote teams, this is what I know about remote salaries.
As more teams go remote, CTOs and HR teams have a decision to make:
- How much should they pay to each remote employee?
Two schools of thought have emerged:
Salaries Indexed on Location
Eg: An engineer in India earns a *lower* salary than the same engineer in the US.
Benefits
- Lower cost - Paying less to most of the company's employees saves money
- Competitive in expensive cities - That money is usually invested in attracting top talent even in expensive cities
Drawbacks
- Creates team tension - Employees don't usually feel "ok" by earning half the salary of a colleague in the same role
- Hard to retain employees in low-cost regions - Their lower salary means they can leave if offered better terms
Equal Salary for the Same Role Regardless of Location
Eg: Engineers at the same level in India and US earn the *same* salary.
Benefits
- Equality & fairness - Equal roles get an equal salary, and no one feels they are paid less than an equivalent colleague
- Hire the best talent in low-cost regions - A low salary in the US is a huge salary in India, and get's the best talent there.
Drawbacks
- Higher cost - Paying the same to everyone tends to be more expensive
- Not competitive in high-cost regions - A high salary in India is likely still not be attractive for US-based Engineers
My preference is equal salaries for similar roles:
- Easier to set up and manage in a Startup context
- I like the sense of fairness and being transparent about salaries
- If I have a tight budget, I’m constrained to hire mostly in lower-cost countries, and I’m ok with that.
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